The Department of Defense is required to submit Selected Acquisition Reports (SAR) annually for Major Defense Acquisition Programs. A SAR is also submitted at the beginning of the program and if a change to the baseline is approved. The KC-46A new aerial tanker program submitted a SAR dated 30 September to Congress and it shows that the current Estimate for Completions (EAC) for the current contract are above the ceiling.

This would mean that Boeing (BA) would make no profit on the initial contract for 17 aircraft as it is responsible for all costs above it.

The Washington Postreports that Boeing’s EAC is a $5.1 billion and the Government’s $5.3 billion. The ceiling is $4.8 billion.

Estimated costs for this initial development of the program have been up-and-down over the last six months but last reports had Boeing still under the ceiling.

The SAR also shows that the Air Force plans to spend $40 billion on procurement for the 179 tankers with the last order placed in 2027.

Israeli Aerospace Industries (IAI) has been modifying at least oneBoeing (BA) 767 aircraft to be a tanker for the Colombian Air Force. The major difference between this aircraft and the KC-X the U.S. Air Force is buying is that it doesn’t rely on a boom for refueling but just the drogue and hose system.

A photo of the aircraft named “Jupiter” was taken recently and posted at Airliners.net. It may be found here.

The aircraft is painted in the correct national markings and has camouflage. It has a pod under each wing for the drogue to refuel aircraft.

Boeing is proposing a version of their 767 aircraft for the KC-X as well as building tankers for Italy and Japan. IAI’s product demonstrates that the 767 is certainly flexible enough to be modified for the tanker mission. It also raises the question about why the new tanker for the Air Force has taken so long to get off of the ground.

SMi’s Military Airlift: Rapid Reaction & Tanker Operations conference will be held on 6-7 December 2010.

Following on from our sell-out events in Seville in 2008 and Frankfurt in 2009, the conference programme will expand on the theme of airlift and rapid reaction, addressing additional topics such as MRTT and tankers.

Bringing together senior policy and decision makers, Military Airlift: Rapid Reaction & Operations will examine key issues, including attempts to harmonise cross-border airlift operations and airlift delivery coordination. Join us for a special concurrent stream examining recent airlift operations in Haiti and Afghanistan.

On the morning of the 8th December delegates will have the opportunity to visit Papa Air Base, Hungary.

In November 2007 Papa was selected to host 3 NATO C-17 Globemaster III transport aircraft, now under the operational command of the newly established Heavy Airlift Wing (HAW). Papa Air Base is located close to the Northern edge of the Bakony Hills in Veszprem County, Hungary. Launched in 2009, the HAW is an integral part of the Strategic Airlift Consortium (SAC), created in September 2006 to serve the strategic airlift requirements of members, in addition to fulfilling a support role for a variety of NATO, EU and UN missions.

If EADS’ (EADS:P) American subsidiary wins the contract from the U.S. Air Force for the new aerial they will assemble the basic aircraft at a new facility in Mobile, AL. When they along with Northrop Grumman (NOC) had the short lived contract two years ago to build the KC-45 derivative of the Airbus A330 the plant would have been used then. Once the contract was lost to Boeing’s (BA) protest the plans to use the plant were put on hold.

EADS has already stated that if they executed the contract all A330 transport production would be transferred to America from current European plants. There are several benefits to EADS by doing this. First the weak dollar will help lower costs of materials and production. Secondly Alabama is a right-to-work state and a non-union workforce is almost guaranteed. This will be a big change from the highly unionized and regulated workforces of the company in France, Germany and Spain.

The Japanese automakers have been doing this for years driven by U.S. requirements for car assembly in the States. Honda, Toyota, Nissan and others have plants primarily in Southern States primarily due to the lack of unions as well as the desire of those states to provide economic assistance and financial incentives. Volkswagon for example has just started production of a large plant outside Chattanooga, TN to illustrate that this process is still on-going.

If a company like EADS is going to produce aircraft for the U.S. military it would make sense to try and assemble these in the U.S. As already demonstrated during the last two years of struggle over the KC-X contract it helps them get Congressional support. The advantage of a non-union workforce will not only help costs but prevent potential issues with labor relations and strikes.

Strikes are one of the most disruptive events that may affect production for the military. The only worst thing is really sabotage. The Sikorsky Aircraft Corporation (SAC) strike in 2006 affected production of the UH-60 Black Hawk aircraft for the Army and the SH-60 model for the Navy. These aircraft were and continue to be critical to U.S. operations in Afghanistan and Iraq. The strike was settled after six weeks but it left bad feelings between the company, its unions and customers.

At a time when one of the biggest messages in Boeing’s favor is to not delay the KC-X contract any longer by allowing time for EADS to bid or waste time with a competition. If a strike did happen that delayed 767 tanker production once Boeing won the contract it would be a serious black eye for the company and its supporters.

Boeing could try to avoid this by slowly moving production to its South Carolina facility which presumably will be non-unionized but that would antagonize its Washington based Congressional allies. There would also be a cost associated with the move that might increase the cost of the production beyond what the Air Force wants or initially awards. The hope is that the KC-X will use a fixed price contract so Boeing would have to have a good estimate going in and try to limit upfront costs.

EADS by starting out in Alabama avoids the potential issue with a unionized workforce. This should also have mean labor costs for the assembly portion of the aircraft. Score one in the foreign company’s favor.

Jean Chamberlin will be assigned as vice president and general manger of A&T.

The group will face serious challenges in the future if the KC-X is not won as C-17 production is winding down for the Air Force and the number of overseas sales is not large. There continues to be support in Congress to keep the C-17 going and if the KC-X contract does go to another source that pressure will only increase.

The current U.S. fleet of aerial tankers consists of a few hundred Cold War era KC-135 aircraft and less then a hundred KC-10 built in the Eighties. The KC-135 is based on the Boeing (BA) 707 airliner but were built as tankers not converted from passenger aircraft. The KC-X program will replace most of the KC-135 if all 400 or more are purchased and built. The initial contract which the proposals are due on is for about 150 aircraft.

Because it will now be several years before the first KC-X flies and a substantial number are available the U.S. Air Force will need to continue to upgrade, maintain and overhaul the existing aircraft. The most modern variant of the KC-135 is the R model. Today ARINC Engineering Services was awarded a contract to upgrade several KC-135R models with new avionics. No value was given for the contract but it will provide modern, digital instruments for the older aircraft. Eventually all KC-135R will receive this upgrade.

Due to the fact that it has taken almost ten years to get to this, the third, attempt to award a contract for a new tanker the KC-135 and KC-10 fleets will fly for several more years beyond what was expected. The continued investment in modernizing these aircraft will help them meet the current set of mission requirements while waiting for the new tankers.

Over the weekend it was reported that the Russian state owned aircraft company, United Aircraft, might be interested in bidding on the KC-X proposal. With Northrop now planning on not participating with EADS only Boeing was left as a confirmed bidder. Russia was about the only other country that had the capability to submit a proposal as they have already made tankers for themselves, India and other users. The thought though of Il-76 based tankers fueling F-22 is sort of hard to imagine. Documents provided to the Seattle Times show that United Aircraft would team with a World Aviation Maintenance to form a new company to bid. The proposal would be based on the Il-96 airliner rather then the older transport tanker already in service.

It would be good for the U.S. Defense Department and Air Force to have some form of competition in the latest attempt to award this contract. Whether the Russian or EADS based bids would be viable is another matter. It is going to be difficult though to award what amounts to a sole-source contract with the mood in Congress of many Northrop and EADS supporters.

The Wichita Eagle reports that the a group backing building both the Boeing and EADs tankers, doesn’t want to reveal its backers:

The investors backing a campaign asking the government to split its contract for aerial refueling tankers between Boeing and Northrop Grumman want to remain anonymous for now. The campaign is called Build Them Both.
“We are funded by a group of investors who have asked to remain nameless at this time,” said the effort’s campaign manager, Carrie Giddens.
The group is not union sponsored and does not have ties to either Northrop or Boeing, Giddens said in an e-mail exchange. However, “we have sought out funding from both companies, their suppliers and unions who would be impacted by building them both.”
The requests went out in the past two weeks.
On Monday, Giddens called Northrop’s decision to pull out of the bidding process “bad news for American workers, our men and women in uniform, and for the taxpayer.”
With only one company seeking a contract, 50,000 jobs that would have been created won’t be, Giddens said in the statement. “Without an ongoing competition there is no way to control costs, to the detriment of our military and taxpayer.”